Property rental is a very good source of income. Nonetheless, it is also a very complex business. Because it requires a careful evaluation and assessment of any potential tenant. Indeed, as a property owner, it is important to mitigate any risk of falling victim to tenants no paying rent or consistently paying late. Consequently, here is how to rent your property stress-free.
Tip #1: Check your prospective tenant credit score
Definitely, this is presumably the most common method that assesses individual creditworthiness. Normally, the higher the credit score, the chance is the tenant would be reliable. Still, credit scores might not give you a full circle into the person’s financial abilities. That is because, some tenants might have bad credit or no credit at all but on paper, their profile looks good. In this case, do the following.
Tip #2: Request for a higher security deposit.
If as a property owner, you find yourself with a potential tenant that has bad credit or no credit but with a good job. You can simply increase the deposit to give the person a chance. For instance, you can request a higher security deposit that can cover at least a month and a 1/2 worth of rent. Hence, you will receive 1st and last month, and one month extra including a security deposit.
In essence, the tenant would pay for 3 months in advance. Actually, in some developing nations where credit score is not well developed, property owners usually asked for at least 06 months rent in advance with extra liability protection.
Tip #3: Request for a co-signer.
A cosigner is someone who signs the lease along with the prospective tenant, guaranteeing that if the tenant doesn’t pay your rent, he or she will take responsibility. They don’t live in your apartment, they just assume your debt. Ideally, as the property manager, you should also run at least a background check on the co-signer. This is an extra layer of security to protect yourself from any tenant insolvencies.
Yet, another thing you can do if the tenant can’t provide all the above. You can establish an additional paperwork to build trust with the prospective tenant.
Tip #4: Direct deposit form.
This not something the tenant has to set up in their online banking account. Rather, follow a specific process.
- First, he or she has to go to the bank or their employer and request a direct deposit form.
- Second, Complete the form, by adding the property owner bank’s address and routing number.
- Third, choose a deposit amount that is equal to the monthly rent amount.
- Forth, the tenant then Submits the form to his/her employer and his/her bank.
- Finally, the tenant brings you a signed copy for your record.
The main advantage of this process, comes from an automatic split of the tenant paycheck into his/her bank account and the property owner bank account.
Tip #5: Personal due diligence
If the last strategy if nothing works but you still want the tenant to move in. You can do some digging to have a better picture of the person’s financial capability. Certainly, it is not a comfortable activity but it could serve the purpose. Indeed, ask the following questions to see if it even makes sense to rent to that person.
- Car payment: what is your monthly car payment?
- Car insurance: what is your monthly car insurance?
- Cable TV: how much was your average monthly cable bill?
- Past rentals: how much is your last monthly lease?
- Phone bill: How much is your monthly phone bill?
- Student loan: how much is your monthly student loan?
- Credit card limit: how much is your credit card limit?
- Please report with the dollar amount any automatic monthly expenses such as child support, college expense for your child, mortgage… that you are subject to.
- Attached supportive evidence for each requested information.
These pieces of information correlated with the person’s monthly income would give you insights into the person’s financial ability to afford without hardship your property rent.
It is important to know how you can rent your property without any risks. Especially when it comes to tenant’s ability to cause major disruption. You can implement any strategy that works best for you or perhaps a combination of all 5 strategies. Yet, don’t rush your process because you’ve seen a potential source of income. Take your time and assess the prospect very well before you hand over the keys.